Iceland’s Democracy Works


Iceland bounced back from economic collapse, with a balanced budget and unemployment down to 4% but no new constitution. President Olafur Ragnar Grimmson said Iceland recovered from the financial disaster by letting the banks fail, helping the poor, and not implementing austerity measures. “Four years ago, we had hope. Four years later, our hope was lost. And our Utopia, it was lost too,” said Smári McCarthy in 2014, who called himself an information activist.[i] He blamed the ten ruling families that control Iceland: “Iceland is not a country of bribery, it is a country of nepotism.” Jonsdottir explained that the Mafia-style financial rulers are called the Octopus. It’s also a country with no army, a vast middle class, free health care and education. It uses mostly geothermal energy and has friendly police, as seen in photos.[ii]

The three largest banks, the currency and the stock market collapsed and about one-sixth of Icelanders lost their savings and most businesses went bankrupt. After the banks borrowed and invested money equal to eight times the country’s GDP in a Ponzi-like scheme, the country went bankrupt in 2008, two weeks after the fall of the Lehman Brothers financial empire in the US. In October 2008 all three of the major banks collapsed. As a consequence, the largest of the new banks, Landsbankinn, is required to have at least 40% women in top management. During the financial crisis the voters forced the government to resign and refused to allow bank bailouts.

The problem was the banks that lent large loans to their shareholders and the cabal of about 30 people who manipulated the economy, as revealed in WikiLeaks documentation in August 2009 that the elite tried to repress. Julian Assange came to Iceland to urge they make information free and in response the Icelandic Modern Media Initiative (IMMI) was passed in June 2010, formulated by hackers including Pirate MP Birgitta Jónsdóttir who became the leader of the Pirate Party in 2013 along with other “geeks.” However, only parts of the IMMI have been implemented.

Citizens showed their displeasure with corrupt bankers by peacefully banging pots and pans in street demonstrations in October 2008. First hundreds, then tens of thousands of people of all ages protested the banks’ misdeeds every Saturday in the main square in Reykjavik. A documentary titled Pots, Pans and Other Solutions is available online, along with a 2015 video titled Reykjavik Rising.[iii] It tells the story of the revolution, emphasizing that people around the globe are realizing that they are not the slaves of government, that it’s up to grassroots movements to fix problems and it’s dangerous to trust political parties. We see a global pattern of the people demanding change and getting it for a while, until entrenched powers surface again to offer stability. By 2015 unemployment was only 4%, the economy was growing and tourism booming. It was compared to Greece although Iceland only has 320,000 people and has its own currency. Iceland’s rebellion encouraged the later Tunisian, Spanish and Greek anti-austerity, anti-neoliberal protests.[iv] Spanish activists acknowledged the influence of Iceland’s example: Slogans included “Spain rise up–be the second Iceland” and “Our role model–Iceland.”

One of the world’s oldest democracies, it was the first demonstration to continuously occupy a central public place, rather than a week of demonstrations like the famous anti-WTO Battle for Seattle in 1999. Starting on October 11, 2008, demonstrations were held every Saturday at 3:00 PM for the next five months demanding that the government and the heads of the Central Bank resign. Anarchists organized pre-rally meetings attended by young people. Other citizens’ meetings were held every Monday to interview leaders held responsible for the financial crisis. A heterogeneous crowd of protesters included many middle-aged women.

New elections were won by the Greens and Social Democrats in 2009 (advocating democratic socialism, a welfare state) but parliament passed a law to pay back 3,500 million euros to the UK and the Netherlands. The government let the banks fail resulting in $85 billion in defaults but saved local deposits by moving them to new banks. It didn’t cut social services or enact austerity programs but raised taxes, didn’t bail out the banks, and prevented investing abroad. The Supreme Court upheld convections of the top bankers. Although only 25% of EU national parliaments and senior ministers are female, Iceland’s feminist Prime Minister Johanna Sigurdardottir (the first openly lesbian head of government) appointed a majority of women to her cabinet in 2009. Iceland had elected the world’s first female president in 1980, college professor Vigdis Finnbogadottir.

A group of artists, singers and comedians, stars of the punk wave of the 80s, formed The Best Party as a joke with a platform to cancel all the country’s debts. A comedian representing the party, in 2010 Jon Gnarr won the mayor’s office in the capital city where almost half of Icelanders live. One of their tactics was posting photos of influential bankers in public toilets and Gnarr sang Tina Turner’s song “The Best.” The people demanded a referendum to deny payment to Europe and to draft a new constitution.

Two of the protesters were voted into parliament. Gen X Birgitta Jónsdóttir, referred to as the MP for the Movement, was a founder of the Icelandic Pirate Party for direct democracy. It was founded first in Sweden in 2006 and spread to other countries including Austria, the US, the UK, Belgium, Germany to around 60 countries but is most successful in Iceland. It supported WikiLeaks, whistleblowers, and direct democracy. Jónsdóttir said that many forces were working behind the scenes to undermine the referendum against debt repayment, fearful they would set the example for countries like Greece. Jónsdóttir explained that the each Icelandic citizen would be responsible for paying for the equivalent of buying a house, which was unacceptable. She stated that the world is in economic warfare and Iceland was the first country to face it, calling for “rEvolution” with direct democracy. An excerpt from Jónsdóttir’s poem “Generations” is on her blog (


willingness to start a revolution

in our own hearts

Taste the bittersweet

brutal honesty 

The collective knowledge

of the transparency generation

spreading through the nerves of cyberspace


The government selected a Constitutional Assembly to write a new constitution in 2010, with members chosen at random, but the Supreme Court declared it illegal the next year. A random selection of 1,000 citizens brainstormed ideas and sent the results to a committee of 25 people who prepared a report. The only requirement to run for the assembly was being an adult who had the backing of 30 people. The committee began its work in February 2011, receiving suggestions from local assemblies and social media, the first crowdsourced constitution. Each week the council posted its latest draft and read the hundreds of comments received the previous week. The policies with the most “likes” moved up on the priority list. In August the constitution was given to parliament, which ignored it for a year. Late in 2012 parliament called for a referendum asking if the new constitution should be approved, and 67% of voters said yes, but in 2013 parliament was led by two Center-Right parties that privatized the banks and voted down the new constitution.[v] It’s still on hold.

However, over 200 corrupt bank executives and others held responsible for the financial disaster were charged with crimes. Lawyer Eva Joly advised how to use a special court called the Landsdomur to prosecute former Prime Minister Geir Haarde in 2012 for not holding emergency cabinet meetings to prevent the financial crisis. In December 2013 four former Kaupthing bank executives were sentenced to prison terms, increased to seven executives in 2015 and 26 bankers were sentenced to prison by early 2016.

[i] Smári McCarthy, “Utopia Lost: Lessons from Iceland,” SLE, January 21, 2014.

[ii] Abby Zimet, “Iceland’s Police Are Not Our Police,” Common Dreams, Marcy 27, 2015.


[iv] A.D. Juliusson and M.S. Helgason, “The Roots of the Saucepan Revolution in Iceland,” in Cristina Flesher Fominaya and Lawrence Cox, eds. Understanding European Movements. Routledge, 2013.

[v] Thorvaldur Gylfason, “Democracy On Ice,” Open Democracy, June 19, 2013.

Iceland’s ‘crowd-sourced’ constitution is dead


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